How to Buy and Sell an Online Business: Basics of Website Flipping

11/25/2022 12:35:00 +0000
According to Data Portal, there are already 5.07 billion people who use the Internet today. That means there are numerous earning opportunities in the digital space and one of these is website flipping. You'll often encounter this term in articles that discuss how to buy and sell an online business.

Website flipping is the practice of buying a website, performing improvements to increase its market value, and selling it for a profit. Generally, it can be profitable due to the unique valuation of digital assets.

The estimated value of online businesses is usually computed by multiplying the monthly revenue by a certain number, depending on several factors. Website flippers may determine the listing price by multiplying the average net profit for the past 12 months by 20 to 60.

Therefore, websites with decent monetization but poor SEO practices and vice versa can still be profitable.
But why sell a profitable online business?
There are various reasons why people sell the websites they've improved. You can use the large payout for another investment or to wipe out debts. Others just want to play safe and collect the money before a Google update or a significant market change affects the site.
What are the common types of online businesses you can buy and sell:
  • eCommerce stores (e.g., Shopify stores)
  • Amazon FBA
  • Amazon sites
  • Amazon affiliate sites
  • Dropshipping sites
  • Google AdSense sites
  • Lead Generation sites
  • Mobile Apps
  • SaaS businesses
How to Buy an Online Business?
Having an entrepreneurial spirit is different from finding the right opportunities.

Whether you prefer a business that requires minimal involvement or something that's more wobbly at the moment, these are the things you should check:
Niche: Ideally, you should choose a niche that appeals to your interest. There are lots of profitable niches out there, but how much do you know about them? You're also more likely to stay focused and motivated when you're one of the customers.

Business size: Do you want a close-knit community within your business? Or are you ready to handle a larger business with more employees? It's crucial to determine your threshold before deciding on business size.

Business model: What is the main source of revenue? It can be a product, service, subscription, ads display, etc. Different business models have different demands.

Steady revenue: Review their revenue in the past 6-12 months. Is it steadily growing? Don't be easily discouraged if the growth is minimal. Look for potential.

Profit margin: Research the usual profit margin for the type of business you want. Use it to determine if the money you'll make per sale is enough for your business plans.

Growth potential: Find out if you could add more options or expand to new markets in the future. You can use this as a selling point.

Assets and contracts: Review all the existing assets of the business. These may include accounts receivable, patents, copyrights, product designs, and distribution rights. Does it have active contracts with suppliers and service providers (e.g., digital marketing agencies)?

Risks: What are their current security protocols? How do they avoid downtime and traffic interruption? Do they have any history of going against search engine guidelines? Here are 5 ways to protect your online store.

As you understand how to buy and sell an online business, you will realize that it's rare to find businesses that excel in all of these aspects. You will need to figure out if a certain issue negates the value of other aspects or if a compromise is possible.

How to Sell an Online Business?
Before putting your online business up for sale, make sure it is ready for a transition. The buyer should be assured that everything will run as normal under them. Organizing paperwork, updating financial records, and creating defined standard operating procedures (SOP) can help speed up the discussion.
You should also do the following:
1. Re-evaluate SEO

Conduct an SEO audit to see if your site is suffering from any health issues. Without solid optimization efforts, a website can lose organic traffic and sales opportunities.

Invest in SEO white hat techniques, such as quality content and mobile-friendliness. The results may be slow but what's important is consistent traffic increase.

2. Fortify existing partnerships

Speak to every individual or organization you've struck a deal with and see if they're willing to work with the new owner. This is particularly important if the partnership is a huge contributor to the success of your business or a part of major operations.

If you have a deal that gives you a significant profit margin, ask if this is transferable too.

Put the new agreement in writing. Prospects would be glad to hear that you've fortified all partnerships before they take over.

3. Step up your game

As mentioned earlier, the value of an online business is obtained by looking at its average monthly revenue in the past 12 months. While you might be excited about retirement or vacation, strive to increase the numbers as you wait for prospects.

Reinvigorate sales channels, boost social media, offer discounts, etc. There are numerous things you can do, but all of these should be studied first. Check out these 16 tips on how to increase sales fast.

4. Broker or private sale?

You may hire an online business broker or conduct a private sale.

In a private sale, you will be able to avoid brokerage fees, but you will handle everything. This can be difficult if you're not experienced at flipping online businesses because:

  • It's unlikely you have an existing contact list of potential buyers.
  • Some people might ask you to walk them through the site only to push a lowball offer. Professional brokers have a process of filtering qualified buyers.
  • Negotiations can be time-consuming. Consider paying for broker services if you have other ventures.
  • The transition is not as easy as signing a paper. Missing one detail can delay the process for months.
Brokerage services that specialize in online-based businesses can help save your resources. Yes, there's a fee but they have the following:
  • A list of qualified buyers. It's not something you built with experience and not learned from articles about how to buy and sell online an business.
  • Standard operating procedures to avoid litigations, penalties, or any issue during the negotiations and after the sale.
  • They know how to present the value of your online business despite its flaws.
The online business brokerage industry is still in its juvenile stage, which means it can be difficult to find a highly experienced broker. The limited competition may drive brokers to charge substantial fees.
Website flipping can be lucrative if you've done all the necessary preparations.
Investigate the business thoroughly before buying. Over time, you'll develop an eye for opportunities. You'll know which undervalued sites have immense potential.

A good website flipper has a timeline. So, make sure you have enough time to understand how to buy and sell an online business as well as to improve the website before selling it.
About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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